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South African Business 2022

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SPECIAL FEATURE Gas

SPECIAL FEATURE Gas exploration is reaping dividends — mining could be next A vital refinery could start receiving new feedstock to prolong its life. Credit: PASA Welkom in the Free State used to be a thriving town, based on gold mining, but it lasted only four decades. The economy of the coastal town of Mossel Bay relied heavily on the gas-to-liquids refinery on the town’s outskirts before the gas ran out. The depletions were expected in both cases but when the gold price experienced a drop of 0 in 1989, the writing was on the wall sooner rather than later for many gold mines. The lack of feedstock for Mossgas, the refinery run by the country’s national oil company, PetroSA, came to a head when the Central Energy Fund reported to parliament that reserves were expected to run out by December 2020. The Fund stated, “there is still no sustainable techno-economic long-term solution for the gas-toliquid refinery”. Since that gloomy report, two gas drilling projects have indicated that both towns could boom again. Petroleum Agency South Africa (PASA) is in charge of oil and gas exploration and one of its goals is to increase the percentage of gas used in the South Africa energy mix. Licences issued for offshore drilling off the southern coast off Mossel Bay and onshore at Virginia near Welkom have both paid off, with discoveries indicating significant reserves. A similar focus is needed in the mining sector to unlock the country’s resources for economic growth. Studies have shown that South Africa is currently attracting just 1% of global spending on mining exploration, a figure that normally reaches R160-billion annually. Several industry leaders have expressed concern about the low level of exploration activity but in 2020 they were joined by the Economic Transformation Committee (ETC) of the African National Congress (ANC), the country’s majority political party. The ETC sees exploration as a way of broadening the scope of ownership within the mining industry. Gwede Mantashe, South Africa’s Minister of Mineral Resources and Energy, wants to see South Africa attracting at least 5% of global exploration. For exploration to expand a reliable cadastre is required. A cadastre is a record of property boundaries and ownership. Drone technology could take the mapping process forward, allowing for more exploration at a lower cost. In his 2019/20 budget vote, Mantashe noted that about 4 000 permanent jobs would be created by the recent investment of about R45-billion through projects such as Exxaro’s Belfast expansion (coal), Sasol’s coal mine replacement programme and Vedanta Resources’ huge zinc mine in the Northern Cape. The Council for Geoscience, another of the agencies of the Department of Mineral Resources and Energy (DMRE), develops and maintains the national geoscience knowledge infrastructure for both the onshore and offshore environment. The Council for Geoscience provides data which is used in exploration for minerals and has found signs that there might be a future for gold mining in Mpumalanga. In addition, the council is actively involved in several projects which could help to take mining into the cleaner energy future. These SOUTH AFRICAN BUSINESS 2022 32

SPECIAL FEATURE include a carbon capture project and a scheme to treat polluted water in such a way that the finished product is useable. New gas finds Gold mining started in the Welkom area in 1949 and started tapering off from 1989. Renergen, through its company Tetra4, has made good progress on its Virginia Gas Project (pictured) which covers 187 000ha of gas fields across Welkom, Virginia and Theunissen. The company has exploration and production rights and recent finds have confirmed the earlier, very positive, reports about the size and quality of the resource. Hiring has increased rapidly since 2019 as the project ramps up from the first phase in which a pilot compressed natural gas (CNG) plant was constructed in 2016. The second phase encompasses liquid natural gas (LNG) and helium. Production of helium is expected to grow from 350kg per day to five tons in the second phase. The first sector to respond to the potential of this gas find was the logistics sector. Bulk Hauliers International Transport (BHIT) has signed an agreement to take LNG to fuel 50 of its trucks, which should lead to lower operating and maintenance costs. South African Breweries is another client. Renergen has signed an agreement with TotalEnergies for distribution and sales. The exciting offshore discovery was made by Total and its partners at a site called Brulpadda off the coast of Mossel Bay. The nearby Luiperd prospect in Block 11B/12B delivered more exciting news when gas condensate was also found there. The block, in the Outeniqua Basin 175km off the southern coast, covers an area of about 19 000km² in water depths of 200m-1 800m. The exploration was done by the semi-submersible rig Deepsea Stavanger (pictured), which journeyed twice from Norway to lead the exploration projects. The two finds raise the odds of Total investing in what it calls a “world-class” offshore gas site. The drilling campaign employed 195 South Africans with specialist skills but the potential spinoff is enormous for the Western Cape and South Africa, if the find leads to drilling and commercialisation. PASA has noted the significance of international oil companies committing to exploration off South Africa’s coast. In the context of the great interest caused in the global market by discoveries in the Rovuma Basin off Mozambique in 2020, South Africa’s potential is sure to be in the spotlight. More exploration will guarantee that interest is maintained. ■ Credit: Renergen 33 SOUTH AFRICAN BUSINESS 2022

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